Posted in Business basics | by: David Cheng

How to Be Compliant on Your Employee’s First Day

Your employee’s first day is incredibly exciting. At Gusto, in addition to helping new teammates get situated with internal systems, we give them cool swag, a “welcome!” balloon, and an “inside joke” watermelon (yes, a real watermelon). You can do something fun for your employee’s first day too. Here are some suggestions to help spark some ideas.

In addition to your employee’s orientation, there are a few key legal and regulatory items you’ll need to comply with. Here are the three things you should know when you hire your first employee.

1. Get compliant with the federal government

There two major legal forms you have to complete to get your employee compliant with the IRS.

Form I-9

Each employee needs to fill out Form I-9 to verify he or she is legally eligible to work in the US. You don’t need to submit the form, but you must keep it on file (a digital copy works just fine) for the entirety of the employee’s employment, and a minimum of either 3 years from the hire date or 1 year from the term date, whichever is longer. Optionally, you can choose to verify the employee’s work status online using e-Verify.

Form W-4

Your employee will also need to fill out Form W-4 to determine their tax withholding (Note: You cannot do this on their behalf). The W-4 does not need to be submitted anywhere, but each company is legally required to keep every employee’s W-4 on file for a minimum of four years. Only modern payroll providers like Gusto manage your withholding taxes on behalf of you and your employee.A withholding tax is a pay-as-you-go tax to the IRS and can be calculated through the W-4 and their IRS withholding calculator. These three things determine how much you withhold for your employee:

  • Marital status
  • The number of allowances claimed on the W-4
  • Compensation (Note: This may depend on the State where your employee receives payroll.)

Employees who anticipate a full refund may be exempt from withholding. This is different from employees who are exempt, like clergy or certain visa holders.

2. Get compliant with your state

Each state has a department to report your new hires. You will typically provide the employee’s name, address, and social security number. Depending on the state, you may have anywhere between a few days to 90 days to submit this information to the state. Check your local state tax, labor, and workforce website for more information. In California, for example, an employee has to file a DE-34.

3. Choose a payroll schedule

Every business has to decide which payroll schedule is best for them and employees. The most common frequencies in the U.S. are monthly, semi-monthly (twice a month), biweekly (every two weeks) and weekly. State laws typically require a minimum pay period — you can always pay more frequently but not less. Each pay schedule has advantages and disadvantages. Check out this article to find out what payroll schedule is right for you.